More Young Black Investors Are Entering the Stock Market
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What is the main topic discussed in this episode?
Here's your Money Briefing for Tuesday, January 16th. I'm J.R. Whelan for The Wall Street Journal.
How did stock ownership change for Black Americans between 2019 and 2022?
Stock ownership jumped from 2019 to 2022, and some surveys show that young Black investors are leading that charge.
Many young black investors in the market are really self-taught. They see this as a tool for potential generational wealth and an opportunity for broadening their finances beyond what they had thought in the past.
We'll talk to Wall Street Journal personal finance reporter Oyen Adedoyen, and we'll hear from a 27-year-old California woman about her experience in the market. That's after the break.
Black Americans are investing in the market more than ever before. Wall Street Journal personal finance reporter Oyen Aydedoyen joins me. So, Oyen, what's fueling the increase in investing?
It could be a number of factors. Researchers are attributing this trend to the retail investor boom that we saw during the pandemic with things like meme stocks really taking off. They're also looking at the influence of social media apps like Instagram, Twitter, TikTok, where finance gurus, as they call themselves, are touting financial advice, some of which are reliable and some of which are more questionable.
What factors are fueling the rise of young Black investors in the market?
But Nevertheless, these are videos and posts that are getting hundreds of thousands of views and likes.
When did we see this uptick in investment begin?
A variety of surveys, including the Federal Reserve's 2022 Survey of Consumer Finances, show that across all races, stock ownership went up, especially from 2019 to 2022. So you're seeing right around that pandemic time and onward. Research also shows that during this time, Black families' participation rates in the stock market increased faster than the participation rates of white families.
When did the pandemic-era retail investor boom begin to affect participation rates?
For instance, as of 2022, 39% of Black Americans owned stocks, an eight percentage point increase from 2016. To compare that with white stock ownership, that increased from 61% to 65% during that same timeframe, according to the Federal Reserve's
How do the choices among black investors today compare to past generations?
Some surveys show that younger black investors, so people under 40, are leading this trend in more participation in the stock market. According to surveys from Ariel Investments and Charles Schwab, nearly 70% of black respondents under 40 were investing compared to roughly 60% of white investors in the same age group. in 2022. The Black investors that I spoke with mainly invested smaller amounts of money into companies that they're familiar with. So we're talking about your big banks, retail companies, and tech companies. Younger Black investors also have an appetite for risk. And this is something that researchers are seeing across all younger investors. This is looking like a reliance on social media for investment information and trading risky investments like cryptocurrencies and so-called meme stocks.
How does investing in stocks compare to what their parents and grandparents invested in?
Interestingly enough, many of these investors, some of which were in their mid to late 20s or early 30s, said that they got started through investments accounts that were opened up by their parents. So their parents maybe got introduced to investing later in life and thought, let me get a head start for my kids. There is also research that suggests that in the past, wealthier black investors mainly put their money into real estate other than stocks. And other research suggests that a gateway into investing for most black Americans used to be through their work-sponsored 401k accounts.
How do investment choices of Black investors under 40 differ from previous generations?
The rise in real estate prices and different preferences for younger generations, though, might be contributing to an increased interest in stocks.
For the younger generation, how do thoughts about the future of their families play into their investment decisions?
The investors that I spoke with are really optimistic about their involvement in the stock market. Even if they're only able to invest small amounts that they're getting from part-time jobs or allowances, they're really excited to remain in this for the long haul.
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Chapters
8 chapters
1
What is the main topic discussed in this episode?
0:02–0:11
2
How did stock ownership change for Black Americans between 2019 and 2022?
0:11–1:36
3
What factors are fueling the rise of young Black investors in the market?
1:36–2:12
4
When did the pandemic-era retail investor boom begin to affect participation rates?
2:12–4:05
5
How do investment choices of Black investors under 40 differ from previous generations?
4:05–5:50
6
How are young Black investors using stocks to pursue generational wealth?
5:50–6:36
7
What lessons did 27-year-old Kayla Beal learn from investing in meme stocks?
6:36–7:26
8
Can increased stock participation narrow the nation's racial wealth gap?
7:26–8:33
Speakers
3 identifiedMore from WSJ Your Money Briefing
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